The tide is beginning to turn back in favor of multifamily landlords, but it’s still too early to get excited.
Developers are starting to pull back on leasing incentives and bring rents back up after an oversupply benefited renters.
At the end of the second quarter, the number of new leases (13,774) surpassed the number of apartments completed (12,751), marking the first time in three years that demand has outpaced supply, according to CoStar. At the depth of the oversupply, new leases trailed completions by 56 percent, so the market has definitely improved.
CoStar’s Juan Arias confirmed that the worst has passed “but the supply overhang is not done yet.” Nearly 28,000 units are under construction.
It hasn’t been an even recovery, reporter Lidia Dinkova found. Some cities are still dealing with stubborn oversupply and slower leasing. And affordable and workforce housing buildings lease faster than market-rate and luxury, where most of the new supply is concentrated. The vacancy rate for the latter is higher than the rest.
The median rent in South Florida is also still coming down, now at about $2,300 a month, 20 percent less than its peak four years ago when the median rent hit $2,850.
The long and short of it, though, is that developers’ profit margins are still taking a hit. Their rents are not meeting their projections, and their net operating incomes are falling short as they spend more than expected on marketing and concessions.
“If they expected $4.2 million, but their marketing expenses are higher, they are netting much less than the $4.2 million,” said Andrew Rahman, vice president of marketing at property manager TRG Management. “It doesn’t help that more properties are being developed.”
Tenants are also paying close attention to their costs. Is it cheaper to move than to stay? It reminds me of employee retention. What was the cost of securing that tenant, and what will it cost you to find someone to take their place?
Miami-Dade is where we’ll probably see the most pain. How will economic factors, including population and labor force growth, affect the rental market? The jury is still out.
What we’re thinking about: Where is Rick Ross’ project planned? I’m looking for the address… Send me a note at kk@therealdeal.com.
CLOSING TIME
Residential: A company managed by Darren Gerard sold the home at 11400 North Bayshore Drive in North Miami for just under $24 million. A trust tied to Kymberly A. Foglia, daughter of Vince Foglia, who founded a medical products company, bought the property.
Commercial: KPR Centers sold the shopping center at 4017 to 4299 West Commercial Boulevard in Tamarac and another center at 1115 to 1299 and 1175 South Federal Highway in Pompano Beach for a combined $109 million. Kimco Realty purchased the properties.
— Research by Mary Diduch
NEW TO THE MARKET
Actress and businesswoman Poonam Khubani listed a unit at the Miami Beach Edition for $80 million. Khubani president of Telebrands International, known for its “As Seen on TV” brand. In 2014, Khubani paid $16.5 million for unit 1602 at 2901 Collins Avenue, following her purchase of unit 1601 for $17.5 million. The triplex penthouse includes a private rooftop with its own swimming pool and summer kitchen, according to the listing. It’s on the market with Anna Sherrill of One Sotheby’s International Realty.
A thing we’ve learned
The principals of a Florida-based real estate investment trust who promoted their business with Christian values, patriotism and helping military veterans are facing charges they defrauded investors, misappropriating $5 million for personal luxuries like private jets, jewelry and adult nightclubs while falsely promoting the company’s profitability.
Elsewhere in Florida
- Environmental activists in Florida suspect the Florida Fish and Wildlife Conservation Commission of “baseless surveillance” after some activists, who have opposed the use of herbicides in waterways, found out the agency pulled their sensitive background information, used by law enforcement for criminal investigations, dozens of times, the Tampa Bay Times reported. Activists have accused the commission of being controlled by real estate developers and failing to act in the interest of wildlife.
- Only in Dade went dark for a few days last week. The Instagram page, which has 2 million followers and is 50 percent owned by musician Emilio Estefan, disappeared in the early hours of March 24, WTVJ reported. Instagram owner Meta told the owners that an internal AI error caused the page to be taken down, and it was back online by Tuesday.
- Developers of the proposed 1,800-home Sustanee project in rural east Orange County are using a new Florida law, Senate Bill 686, to fast-track the subdivision by seeking to certify the 1,400-acre site as an “agricultural enclave,” the Orlando Sentinel reported. If approved, or if local officials fail to act within 90 days, the certification will bypass county land-use controls and automatically permit single-family housing on the land, which is in the Econlockhatchee River Basin.
— Rachel Stone
